Power industry

Increasing profits in the power industry despite the pandemic

Both the Coronavirus and wildfires are impacting the market for valves for the power industry. Due to the pandemic, valve industry personnel is not able to communicate in person or attend power and valve exhibitions. Investment in valves by power industry purchasers will be down in 2020 due to postponement of both capital and repair projects. (1)
 
The impact of the pandemic is affecting various segments differently. This includes:
  • Countries: the impact on India and the U.S. will be negative while China is moving forward as planned.
  • Fuel type: Nuclear projects are not affected, whereas renewable projects have been delayed in some countries.
  • Project type: There is a progressively decreasing impact on the following categories.
  • New companies will be the most impacted. Very few valves are sold to new power companies who have never purchased a valve.
  • The market for valves for new power plants owned by existing operators is relatively small but impacted.
  • The market for replacement valves is larger and less impacted.
  • The market for repairs and service is large and the least impacted.
  • Valve type: with high-performance valves, the decision can be made to delay replacement and instead repair them. When general performance valves fail, they usually are replaced rather than repaired. So there is a more significant impact on the high-performance valves.

Focus on profit
The wildfires in Australia, California and elsewhere are being blamed on climate change and specifically fossil-fired power generation. This publicity has the effect of delaying gas turbine and coal-fired plant projects. Valve companies are, therefore facing several years where revenues from the power industry will not be increasing. However, profits can be improved.
Valve companies which adapt to the new ways to target prospects and communicate with them will have an advantage which can be converted to greater markets shares, margins, and profits.
Market research has been used as a peripheral tool by valve suppliers. Now it can be the foundation of a program to pursue the Most Profitable Market (MPM) successfully. There is already enough information available through media, associations, conferences and internet resources to determine the best prospects and then convince them that the supplier has a better product. Here is an approach based on customer knowledge and not sales leads.

Activity  Present Approach   MPM
 Sales Initiation Sales Leads and Reps  Predicted Prospects
 Market research Peripheral Foundation of approach
 Sales promotion Unstructured and Reactive  Structured and Proactive

Less than 1000 companies purchase ninety per cent of the power industry valves. Valve suppliers can quickly identify the prospects and even the processes used in each plant.
Here is an example of coal-fired plant operators with planned additions between 6000-7000 MW


Company planned MW installed MW
NLC India 6,700 3,990
TANGEDCO 6,640 4,320
J-POWER 6,356 8,482
Eskom 6,352 41,129
UPRVUNL 6,270 5,474
GCM Resources 6,000

With knowledge of the existing capacity at any point in time, the expenditures for new valves, replacements and repairs can be made.  Here are some tabulations for East European countries.

Coal-fired capacity - MW

Country

2018

2019

2020

2021

2022

2023

2024

Romania

5,305

5,305

5,305

5,305

5,305

5,305

6,000

Slovakia

881

881

881

881

881

881

881

Bosnia & Herzegovina

2,073

2,073

2,073

2,073

2,073

3,000

4,000

Serbia

4,405

4,405

4,405

4,405

4,405

5,000

5,000

North Macedonia

800

800

800

800

800

800

1,200

Slovenia

1,069

1,069

1,069

1,069

1,069

1,069

1,069

Croatia

210

210

210

210

210

210

210


COVID-19 and climate change present challenges to valve companies.  Those that best meet these challenges can increase market shares, gross margins, and profits.

(1) Valves: World Markets published by the McIlvaine Company
 

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